Getting trapped in time shares
In retrospect, Jack and Grace Harkness know that they should never have purchased a time share in Myrtle Beach.
They’d never been to South Carolina. They hadn’t planned to go there. Their vacations generally involved visiting relatives or heading to exotic locations such as China and Panama. But the salesman told them that they could use the time-share interest to swap for vacations around the world. And that seemed like a good idea.
Time-sharing resorts typically give buyers the right to use a condo or hotel unit for a specific time period, sometimes at a selection of properties worldwide. For the Harknesses, it just never worked out. The places they wanted to stay were never available at the times they planned to go.
Five years after buying the time share, Grace said, they’ve never used the time -- one week a year -- that they paid $10,000 for. She wants to get her money back and to stop getting hit with $450 in annual fees each year.
“I don’t know what made this sound so good,” Grace, 77, said. “We asked the company that we bought it from if they would buy it back. They said, ‘No, no, no. Keep trying. I’m sure you’ll love it. It will be a great experience.’ ”
The Harknesses are learning the hard way what many owners already know. It’s easy to get into a time share, but it can be tough and costly to get out.
Few developers will buy them back; the ones that do will usually charge a hefty commission. Using local Realtors and traditional classified advertisements is often futile, experts say. Although Web-based ads can generate interest, they’re often costly. And there’s no assurance that the advertised time share will sell at all -- much less at a price that’s close to what the owner paid.
“There is a secondary market for time shares,” said Bill Rogers, founder of Timeshare User’s Group, a 13-year-old website aimed at helping owners buy, sell, swap and rent their units. “But if you bought it from the developer, you would be lucky to get 50 cents on the dollar.”
Buying a time share is a lot like buying a new car, said Rosanne Luba, director of sales at SellMyTimeshareNow.com. Your interest depreciates steeply the moment you walk off the sales floor.
“You never make money reselling a time share,” Luba said. “It’s not exactly that you’ve lost money. It’s like a car. If you’ve used it, you’ve gotten value out of it. But it’s not like buying a house that’s going to appreciate.”
That’s partly because most time-share owners are not buying an interest in the underlying real estate. They are simply buying the right to use a piece of property during a set time of year, or for a set number of days each year, Luba said. (Time-share interests can be “fixed” -- the same week and unit each year -- or “floating” in which the owner gets seven days, for example, but can alter the time of year and unit.)
In some cases, the time-share interest lets the owner earn points in a rewards system offered by the property owner, which could be a major hotel chain such as Marriott or Hilton.
Although these rights are arguably valuable, they’re also intangible, Luba said. Unlike real estate that can be appraised, time shares can be tough to accurately value.
“They are worth a different amount to everyone who uses them,” she said.
By the same token, time shares come with annual fees for taxes and maintenance that can range from a few hundred dollars to several thousand. Owners are also on the hook for occasional “special assessments,” which could be levied to make improvements to the property. Although the fees can be money well spent for those making great use of their time-share interests, they can discourage buyers.
Moreover, private sellers such as the Harknesses don’t have the advantage of a sales team that can lure buyers in with giveaways and lead them through a luxurious five-star resort as a temptation to buy.
Jack and Grace Harkness live in Minneapolis and say they don’t even have a picture of their Myrtle Beach unit because they’ve never once set eyes on it.
“It’s really embarrassing to admit that we fell for this,” Grace said. “My husband has paid fees several times to people who said they would sell it, but it never sells and we just have to keep paying the fees.”
Sellers can list their units for sale on Rogers’ site, which has about 3,000 advertisements, for just $10. He suggests that sellers who get a nibble from potential buyers hire a transfer agent to complete the paperwork, which will cost them a couple hundred dollars more.
Luba’s site charges vastly more -- $499 -- for advertisements. However, the site promises to refund the fee if the time share sells for the advertised price elsewhere.
Both experts say the key to selling is the price. Owners must accept that they’re unlikely to get their money back. Rogers says time-share interests typically go for 20% to 50% of the original purchase price. Luba says the price can vary dramatically based on the market and the age of the unit, but 50% to 60% is pretty common.
Both suggest that sellers scan advertisements for similar units and price theirs near the middle or low end of that range. Still, there are no guarantees.
“Anyone who tells you that you’ll sell in a particular period of time, or you get a particular amount for it, is just making it up,” Luba said. “These are private sales. We can only tell you about offers, not what a unit sold for in the end.”
Kathy M. Kristof welcomes your comments but regrets that she cannot respond to every question. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For previous columns, visit latimes .com/kristof.
